Sunday, June 13, 2010

When Communism collapsed during the 1980s, what died was not just the particular collectivist economic system and authoritarian politics of the Soviet Union and its satellites. Cremated along the corpse of Communism was the broadly civic-minded conception of development as the central responsibility of the state – a conception that had been largely shared by communists and liberals during the Cold War.

In the wake of this ideological collapse, what emerged was the so-called "Washington Consensus.” Coined by former World Bank economist John Williamson, the phrase described the paradigmatic program of economic “reform” imposed on parts of the Global South during the 1980s and 1990s by the IMF, and generally with the support of the US government. Pointing to the undeniable corruption, inefficiency and rent-seeking of most states in the Global South, the neoliberals associated with the Washington Consensus demanded that aid recipients slash public bureaucracies and services, reduce dependence on foreign aid, dismantle trade barriers, and curtail the political power of organized labor. Pioneered as domestic policy in Margaret Thatcher’s Great Britain and Ronald Reagan’s United States, the programs associated with the Washington Consensus soon became a model that London and Washington sought to export to the Global South and the post-Communist world. As Dani Rodrik put it, "'Stabilize, privatize, and liberalize' became the mantra of a generation of technocrats who cut their teeth in the developing world and of the political leaders they counseled." "There is no alternative," Margaret Thatcher famously declared.

Where such programs were imposed, they often led to what might be called the "hollowing out" of the state. The physical buildings and institutions of those states remained in place, but the ambitions and capacities of those states shriveled. This late- and post-Cold War hollowing out of states, particularly in the Global South, had two important results. First, it signaled to everyone in these countries that, "you are on your own." The end of the promise of building a public goods-providing state – or rather, the revelation that this promise had always been empty – unleashed a flood of survival entrepreneurship throughout the Global South, above all in former Communist states. As the Iron Curtain fell, some people entered legal industries; many others, however, pursued faster profits in the deviantly globalized marketplaces of the post-Cold War world or were lured into the role of foot soldiers in flourishing deviant industries. The second and equally important impact of hollowed states was the dismantling of the regulatory capacity in the Global South. These weak states lacked the institutions and the practical capacity to enforce the rules of international transactions, liberating both the forces of mainstream as well as deviant globalization.